NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
No. 1 $10,000,000
LUMINANT WORLDWIDE CORPORATION
6% CONVERTIBLE DEBENTURE
DUE SEPTEMBER 21, 2003
THIS DEBENTURE is one of a series of duly authorized and issued
debentures of Luminant Worldwide Corporation, a Delaware corporation, having a
principal place of business at 00000 Xxxx Xxxx, Xxxxx 0000, Xxxxxx, Xxxxx
00000-0000(the "COMPANY"), designated as its 6% Convertible Debentures, due
September 21, 2003, in the aggregate principal amount of Seventeen Million
Dollars ($17,000,000) (the "DEBENTURES").
FOR VALUE RECEIVED, the Company promises to pay to Montrose
Investments Ltd. or its registered assigns (the "HOLDER"), the principal sum of
Ten Million Dollars ($10,000,000), on September 21, 2003 or such earlier date as
the Debentures are required or permitted to be repaid as provided hereunder (the
"MATURITY DATE") and to pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Debenture at the rate of 6% per
annum, payable on a quarterly basis on March 31, June 30, September 30 and
December 31 of each year while such Debentures are outstanding, commencing on
the earlier to occur of a Conversion Date (as defined herein) for such principal
amount and September 30, 2000 (each an "INTEREST PAYMENT DATE"), in cash or
shares of Common Stock (as defined in Section 6). Subject to the terms and
conditions herein, the decision whether to pay interest hereunder in shares of
Common Stock or cash shall be at the discretion of the Company. Not less than
five Trading Days (as defined in Section 6) prior to each Interest Payment
Date, the Company shall provide the Holder with written notice
Convertible Debenture
of its election to pay interest hereunder in cash or in shares of Common
Stock pursuant to the terms of Section 4(a)(i) (the Company may indicate in
such notice that the election contained in such notice shall continue for
later periods until revised). Failure to timely provide such written notice
shall be deemed an election by the Company to pay the interest on such
Interest Payment Date in shares of Common Stock pursuant to the terms of
Section 4(a)(i). Interest shall be calculated on the basis on a 360-day year
and shall accrue daily commencing on the Original Issue Date (as defined in
Section 6) until payment in full of the principal sum, together with all
accrued and unpaid interest and other amounts which may become due hereunder,
has been made. Interest hereunder will be paid to the Person (as defined in
Section 6) in whose name this Debenture is registered on the records of the
Company regarding registration and transfers of Debentures (the "DEBENTURE
REGISTER"). All overdue accrued and unpaid interest to be paid in cash
hereunder shall entail a late fee at the rate of 18% per annum (or such lower
maximum amount of interest permitted to be charged under applicable law)
("LATE FEE") (to accrue daily, from the date such interest is due hereunder
through and including the date of payment), payable in cash. If such Late Fee
is paid by the Company in shares of its Common Stock, then the number of
shares of Common Stock issuable on account of such Late Fee shall equal the
cash amount of such Late Fee on such Late Fee payment date divided by the
Conversion Price (as defined herein) on such date.
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 6) and may be transferred or exchanged only in
compliance with the Purchase Agreement. Prior to due presentment to the Company
for transfer of this Debenture, the Company and any agent of the Company may
treat the Person (as defined in Section 6) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
SECTION 3. EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT", wherever used herein, means any one of
the following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of the principal of,
interest on or liquidated damages in respect of, any Debentures, free of
any claim of subordination, as and when the
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Convertible Debenture
same shall become due and payable (whether on a Conversion Date or the
Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or otherwise commit
any breach of any of the Transaction Documents (as defined in Section
6), and such failure or breach shall not have been remedied within five
Business Days after the date on which notice of such failure or breach
shall have been given;
(iii) the Company or any of its subsidiaries shall
commence, or there shall be commenced against the Company or any such
subsidiary a case under any applicable bankruptcy or insolvency laws as
now or hereafter in effect or any successor thereto, or the Company
commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter
in effect relating to the Company or any subsidiary thereof or there is
commenced against the Company or any subsidiary thereof any such
bankruptcy, insolvency or other proceeding which remains undismissed for
a period of 90 days; or the Company or any subsidiary thereof is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company or any
subsidiary thereof suffers any appointment of any custodian or the like
for it or any substantial part of its property which continues
undischarged or unstayed for a period of 90 days; or the Company or any
subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they
become due; or the Company or any subsidiary thereof shall call a meeting
of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or the Company or any subsidiary thereof
shall by any act or failure to act expressly indicate its consent to,
approval of or acquiescence in any of the foregoing; or any corporate or
other action is taken by the Company or any subsidiary thereof for the
purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations
under any other Debenture or any mortgage, credit agreement or other
facility, indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any long
term leasing or factoring arrangement of the Company in an amount
exceeding $1,000,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on which it
would otherwise become due and payable;
(v) the Common Stock shall fail to be quoted for trading
on the Nasdaq National Market ("NASDAQ") or listed for trading on the
New York Stock Exchange, American Stock Exchange or the Nasdaq SmallCap
Market (each, a "SUBSEQUENT MARKET") for an aggregate of five Trading
Days (which need not be consecutive Trading Days);
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Convertible Debenture
(vi) the Company shall be a party to any Change of
Control Transaction (as defined in Section 6), shall agree to sell or
dispose all or in excess of 33% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction), or shall redeem or repurchase more than a de minimis number
of shares of Common Stock or other equity securities of the Company
(other than redemptions of Underlying Shares (as defined in Section 6));
(vii) an Underlying Shares Registration Statement (as
defined in Section 6) shall not have been declared effective by the
Commission (as defined in Section 6) on or prior to the 120th day after
the Original Issue Date;
(viii) if, during the Effectiveness Period (as defined in
the Registration Rights Agreement (as defined in Section 6)), the
effectiveness of the Underlying Shares Registration Statement lapses for
any reason or the Holder shall not be permitted to resell Registrable
Securities (as defined in the Registration Rights Agreement) under the
Underlying Shares Registration Statement, in either case, for more than
five consecutive Trading Days or an aggregate of ten Trading Days (which
need not be consecutive Trading Days);
(ix) an Event (as defined in the Registration Rights
Agreement) shall not have been cured to the satisfaction of the Holder
prior to the expiration of thirty days from the Event Date (as defined in
the Registration Rights Agreement) relating thereto (other than an Event
resulting from a failure of an Underlying Shares Registration Statement
to be declared effective by the Commission on or prior to the 120th day
after the Original Issue Date, which shall be covered by Section
3(a)(vii));
(x) the Company shall fail for any reason to deliver
certificates to a Holder prior to the fifth Trading Day after a
Conversion Date pursuant to and in accordance with Section 4(b) or the
Company shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with requests
for conversions of any Debentures in accordance with the terms hereof;
and
(xi) the Company shall fail for any reason to deliver the
payment in cash pursuant to a Buy-In (as defined herein) within five
Business Days after notice is deemed delivered hereunder.
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become at the
Holder's election, immediately due and payable in cash, PROVIDED, that if the
Company fails to pay the amounts due as a result of an Event of Default by the
seventh Trading Day following the declaration of an Event of Default in cash,
the Holder may request payment of such amounts in shares of Common Stock,
determined by reference to the lower of (x) the Conversion Price then in
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Convertible Debenture
effect and (y) the average of the Per Share Market Values for the five
Trading Days preceding the date (1) of declaration of the Event of Default or
(2) of payment in full of the amount due pursuant to the terms hereof,
whichever is lower. The number of shares of Common Stock issuable in payment
thereof shall be determined by dividing the aggregate amount due to the
Holder by the Conversion Price. The aggregate amount payable upon an Event
of Default shall be equal to the sum of (i) the Mandatory Prepayment Amount
(as defined in Section 6) plus (ii) the product of (A) the number of
Underlying Shares issued in respect of conversions hereunder within thirty
days of the date of a declaration of an Event of Default and then held by the
Holder and (B) the Closing Price (as defined in Section 6) on the date
prepayment is due or the date the full prepayment price is paid, whichever is
greater. Interest shall accrue on the prepayment amount hereunder from the
seventh day after such amount is due (being the date of an Event of Default)
through the date of prepayment in full thereof at the rate of 18% per annum
(or such lesser maximum amount that is permitted to be paid by applicable
law), to accrue daily from the date such payment is due hereunder through and
including the date of payment. All Debentures and Underlying Shares for
which the full prepayment price hereunder shall have been paid in accordance
herewith shall promptly be surrendered to or as directed by the Company. The
Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and the Holder may immediately
and without expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Xxxxxx at
any time prior to payment hereunder. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent
thereon.
SECTION 4. CONVERSION.
(a) (i) CONVERSION AT OPTION OF HOLDER. This Debenture
shall be convertible into shares of Common Stock at the option of the Holder,
in whole or in part at any time and from time to time, after the Original Issue
Date (subject to the limitations on conversion set forth in Section 4(a)(v)
hereof). The Holder shall effect conversions at its option by delivering to the
Company the form of conversion notice attached hereto as EXHIBIT A (a "HOLDER
CONVERSION NOTICE"), specifying therein the principal amount of Debentures to be
converted and the date on which such conversion is to be effected, which date
may not be prior to the date such Holder Conversion Notice is deemed to have
been delivered hereunder (a "CONVERSION DATE") and shall contain a schedule in
the form of SCHEDULE 1 to the Holder Conversion Notice (as amended on each
Conversion Date, the "CONVERSION SCHEDULE") reflecting the remaining principal
amount of this Debenture and all accrued and unpaid interest thereon subsequent
to the conversion at issue. If no Conversion Date is specified in a Holder
Conversion Notice, the Conversion Date shall be the date that such Holder
Conversion Notice is deemed delivered hereunder. Subject to Section 4(b), each
Holder Conversion Notice, once given, shall be irrevocable. To effect
conversions hereunder (including conversion pursuant to a Company Conversion
Notice), the Holder shall not be required to physically surrender this Debenture
to the Company unless the aggregate principal amount of this Debenture is so
converted. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture plus all accrued and unpaid
interest thereon in an amount equal to the applicable conversion, which shall be
evidenced by entries set forth in the Conversion
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Convertible Debenture
Schedule. The Holder and the Company shall maintain records showing the
principal amount converted and the date of such conversions. The Holder and
any assignee, by acceptance of this Debenture, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this
Debenture may be less than the amount stated on the face hereof.
(ii) CONVERSION AT OPTION OF THE COMPANY. Subject to the
conditions of this section, the Company may require conversions of all or a
portion of the then outstanding principal amount of the Debentures if: (i) the
Per Share Market Value for each Trading Day during a 20 Trading Day period
exceeds 200% of the Conversion Price, (ii) the Underlying Shares Registration
Statement shall have been effective and the prospectus thereunder available to
the Holders for the resale of all Underlying Shares issuable upon such
conversion during the entire 20 Trading Day period described in clause (i) above
or the Underlying Shares may be sold by the Holder subject to such conversion
without volume limitation under Rule 144(k) promulgated under the Securities Act
(as defined in Section 5), (iii) the Company has available sufficient unreserved
and available shares of Common Stock to fulfill its share delivery requirements
upon such conversion, (iv) the Common Stock is listed or quoted for trading on
the NASDAQ or a Subsequent Market during the entire 20 Trading Day period
described in clause (i) above, (v) such conversion would not result in a
violation of Section 4(a), and (vi) the Company shall not have been more than
two Trading Days late in delivering any conversion shares pursuant to Section
4(b). The Company shall exercise its right to require conversions under Section
4(a)(ii) by delivering to the Holder a completed conversion notice in the form
attached as EXHIBIT B (a "COMPANY CONVERSION NOTICE"). Each of a Company
Conversion Notice and a Holder Conversion Notice are sometimes referred to
herein as a Conversion Notice. Each Company Conversion Notice shall specify the
principal amount of Debentures to be converted. Subject to the Holder's rights
under Section 4(b), the conversion subject to each Company Conversion Notice,
once given, shall be irrevocable. Conversions at the request of the Company
shall be reflected in the Conversion Schedule.
(iii) AUTOMATIC CONVERSION. Subject to the provisions in this
paragraph, the principal amount of Debentures and interest due thereunder for
which conversion notices have not previously been received or for which
prepayment has not been made or required hereunder shall, at the option of the
Company, be automatically converted into shares of Common Stock on the third
anniversary of the Original Issue Date (the "AUTOMATIC CONVERSION DATE")
pursuant to Section 4(a)(iv), at the Conversion Price on such date. A
conversion contemplated by this paragraph shall not occur if on the Automatic
Conversion Date: (a) (1) an Underlying Securities Registration Statement is not
then effective that names the Holder as a selling stockholder thereunder and (2)
the Holder is not permitted to resell Underlying Shares pursuant to Rule 144(k)
promulgated under the Securities Act, without volume restrictions, as evidenced
by an opinion letter of counsel acceptable to the Holder and the transfer agent
for the Common Stock; or (b) there are not sufficient shares of Common Stock
authorized and reserved for issuance upon such conversion; or (c) the Common
Stock shall fail to be listed or quoted for trading on the NASDAQ or a
Subsequent Market. Not less than ten Trading Days prior to the Automatic
Conversion Date, the Company shall provide the Holder with written notice of its
election to automatically convert the principal amount of
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Convertible Debenture
Debentures and interest due thereunder on the Automatic Conversion Date into
shares of Common Stock pursuant to the terms hereof. Failure to timely
provide such written notice shall be deemed a relinquishment of the Company's
rights pursuant to this Section.
(iv) NUMBER OF UNDERLYING SHARES ISSUABLE UPON CONVERSION. (A)
The number of shares of Common Stock issuable upon a conversion hereunder shall
be determined by adding the sum of (i) the quotient obtained by dividing (x) the
outstanding principal amount of this Debenture to be converted and (y) the
Conversion Price, and (ii) the amount equal to (I) the product of (x) the
outstanding principal amount of this Debenture to be converted and (y) the
product of (1) the quotient obtained by dividing .06 by 360 and (2) the number
of days for which such principal amount was outstanding, divided by (II) the
Conversion Price on the Conversion Date, PROVIDED, that if the Company shall
have elected to pay the interest due on a Conversion Date in cash pursuant to
the terms hereof, subsection (ii) shall not be used in the calculation of the
number of shares of Common Stock issuable upon a conversion hereunder.
(B) Notwithstanding anything to the contrary contained
herein, if on any Conversion Date:
(1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury
stock, is insufficient to pay interest hereunder in shares of Common
Stock;
(2) after the Interest Effectiveness Date (as defined in
Section 6) such shares of Common Stock (x) are not registered for resale
pursuant to an effective Underlying Shares Registration Statement and (y)
may not be sold without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act (if the shares of Common Stock are
permitted by the Holder to be delivered under this clause (2) prior to
the Effectiveness Date (as defined in the Registration Rights Agreement)
and thereafter an Underlying Shares Registration Statement shall be
declared effective by the Commission, the Company shall, within three
Trading Days after the date of such declaration of effectiveness,
exchange such shares for shares of Common Stock that are free of
restrictive legends of any kind);
(3) the Common Stock shall fail to be listed or quoted
for trading on the NASDAQ or a Subsequent Market;
(4) the Company has failed to timely satisfy its
conversion obligations hereunder; or
(5) the issuance of such shares of Common Stock would
result in a violation of Sections 4(a)(v)(A) or (B),
then, at the option of the Holder, the Company, in lieu of
delivering shares of Common Stock pursuant to Section 4(a)(iv)(A)(ii), shall
deliver, within three Trading Days of
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Convertible Debenture
each applicable Conversion Date, an amount in cash equal to the product of
(a) the outstanding principal amount of the Debentures to be converted on
such Conversion Date and (b) the product of (x) the quotient obtained by
dividing .06 by 360 and (y) the number of days for which such principal
amount was outstanding.
(v) CERTAIN CONVERSION RESTRICTIONS.
(A) A Holder may not convert Debentures or
receive shares of Common Stock as payment of interest hereunder to the extent
such conversion or receipt of such interest payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 4.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
interest on, the Debentures held by such Holder after application of this
Section. Since the Holder will not be obligated to report to the Company the
number of shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the issuance of shares
of Common Stock in excess of 4.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority and
obligation to determine whether the restriction contained in this Section will
limit any particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Debentures are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Debentures
that, without regard to any other shares that the Holder or its affiliates may
beneficially own, would result in the issuance in excess of the permitted amount
hereunder, the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section 4(b) and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the permitted amount hereunder for future conversions or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 61 days prior notice to the Company. Other Holders
shall be unaffected by any such waiver.
(B) A Holder may not convert Debentures or
receive shares of Common Stock as payment of interest hereunder to the extent
such conversion or receipt of such interest payment would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of, and payment of
interest on, the Debentures held by such Holder after application of this
Section. Since the Holder will not be obligated to report to the Company the
number of shares of Common Stock it may hold at the time of a conversion
hereunder, unless the conversion at issue would result in the issuance of shares
of Common Stock in excess of 9.999% of the then outstanding shares of Common
Stock without regard to any other shares which may be beneficially owned by the
Holder or an affiliate thereof, the Holder shall have the authority
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Convertible Debenture
and obligation to determine whether the restriction contained in this Section
will limit any particular conversion hereunder and to the extent that the
Holder determines that the limitation contained in this Section applies, the
determination of which portion of the principal amount of Debentures are
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of Debentures
that, without regard to any other shares that the Holder or its affiliates
may beneficially own, would result in the issuance in excess of the permitted
amount hereunder, the Company shall notify the Holder of this fact and shall
honor the conversion for the maximum principal amount permitted to be
converted on such Conversion Date in accordance with the periods described in
Section 4(b) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted amount hereunder
for future conversions or return such excess principal amount to the Holder.
The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other Holder) upon not less than 61 days prior notice
to the Company. Other Holders shall be unaffected by any such waiver.
(C) If the Common Stock is then listed for trading on
the NASDAQ or the Nasdaq SmallCap Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 5,416,290 shares of Common Stock (which equals 19.999% of the number
of shares of Common Stock outstanding on the Trading Day immediately preceding
the Original Closing Date) upon conversions of the Debenture at a price per
share that is less than the Closing Price on the Trading Day immediately
preceding the Original Issue Date (such number of shares, the "ISSUABLE
MAXIMUM"). Each Holder shall be entitled to a portion of the Issuable Maximum
equal to the quotient obtained by dividing (x) the aggregate principal amount of
the Debentures issued and sold to such Holder on the Original Issue Date by (y)
the number of the Debenture issued and sold by the Company on the Original Issue
Date. If any Holder shall no longer hold the Debenture, then such Xxxxxx's
remaining portion of the Issuable Maximum shall be allocated pro-rata among the
remaining Holders. If on any Conversion Date (A) the shares of Common Stock are
listed for trading on the NASDAQ or Nasdaq SmallCap Market, (B) the Conversion
Price then in effect is such that the aggregate number of shares of Common Stock
that would then be issuable upon conversion in full of all then outstanding
Debentures, together with any shares of Common Stock previously issued upon
conversion of the Debenture would exceed the Issuable Maximum, and (C) the
Company shall not have previously obtained the vote of shareholders (the
"SHAREHOLDER APPROVAL"), if any, as may be required by the applicable rules and
regulations of the NASDAQ (or any successor entity) applicable to approve the
issuance of shares of Common Stock in excess of the Issuable Maximum pursuant
to the terms hereof, then the Company shall issue to the Holder requesting a
conversion a number of shares of Common Stock equal to such Holder's pro-rata
portion (which shall be calculated pursuant to the terms hereof) of the Issuable
Maximum and, with respect to the remainder of the aggregate principal amount of
the Debentures then held by such Holder for which a conversion in accordance
with the Conversion Price would result in an issuance of shares of Common Stock
in excess of such Holder's pro-rata portion (which shall be calculated pursuant
to the terms hereof) of the Issuable Maximum (the "EXCESS PRINCIPAL"), the
converting Holder shall have the option to require the Company to either:
(1) use its best efforts to obtain the Shareholder Approval applicable to such
issuance as soon as is possible, but in any event not later than the 60th day
after such request, or (2) pay cash to the
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Convertible Debenture
converting Holder in an amount equal to the Mandatory Prepayment Amount for
the Excess Principal as liquidated damages and not as penalty. If the
converting Holder shall have elected the first option pursuant to the
immediately preceding sentence and the Company shall have failed to obtain
the Shareholder Approval on or prior to the 60th day after such request, then
within three days of such 60th day, the Company shall pay cash to the
converting Holder an amount equal to the Mandatory Prepayment Amount for the
Excess Principal as liquidated damages and not as penalty. If the Company
fails to pay the Excess Principal in full pursuant to this Section within
seven days after the date payable, the Company will pay interest thereon at a
rate of 18% per annum or such lesser maximum amount that is permitted to be
paid by applicable law, to the converting Holder, accruing daily from the
Conversion Date until such amount, plus all such interest thereon, is paid in
full. The Company and the Holder understand and agree that shares of Common
Stock issued to and then held by the Holder as a result of conversions of
Debentures shall not be entitled to cast votes on any resolution to obtain
Shareholder Approval pursuant hereto.
(b) (i) Not later than three Trading Days after any
Conversion Date, the Company will deliver to the Holder (i) a certificate or
certificates which shall be free of restrictive legends and trading
restrictions (other than those required by Section 3.1(b) of the Purchase
Agreement) representing the number of shares of Common Stock being acquired
upon the conversion of Debentures, and (ii) a bank check in the amount of
accrued and unpaid interest (if the Company has timely elected or is required
to pay accrued interest in cash). The Company shall, upon request of the
Holder, if available, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. If in the case of any
Conversion Notice such certificate or certificates are not delivered to or as
directed by the applicable Holder by the third Trading Day after a Conversion
Date, the Holder shall be entitled by written notice to the Company at any
time on or before its receipt of such certificate or certificates thereafter,
to rescind such conversion, in which event the Company shall immediately
return the certificates representing the principal amount of Debentures
tendered for conversion.
(ii) If the Company fails to deliver to the Holder
such certificate or certificates pursuant to Section 4(b)(i) by the third
Trading Day after the Conversion Date, the Company shall pay to such Holder,
in cash, as liquidated damages and not as a penalty, $5,000 for each Trading
Day after such third Trading Day until such certificates are delivered.
Nothing herein shall limit a Xxxxxx's right to pursue actual damages or
declare an Event of Default pursuant to Section 3 herein for the Company's
failure to deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit the Holders from
seeking to enforce damages pursuant to any other Section hereof or under
applicable law. Further, if the Company shall not have delivered any cash
due in respect of conversions of Debentures or as payment of interest thereon
by the third Trading Day after the Conversion Date, the Holder may, by notice
to the Company, require the Company to issue shares of Common Stock pursuant
to Section 4(c), except that for such purpose the Conversion Price applicable
thereto shall
-10-
Convertible Debenture
be the lesser of the Conversion Price on the Conversion Date and the
Conversion Price on the date of such Holder demand. Any such shares will be
subject to the provision of this Section.
(iii) In addition to any other rights available to the
Holder, if the Company fails to deliver to the Holder such certificate or
certificates pursuant to Section 4(b)(i) by the third Trading Day after the
Conversion Date, and if after such third Trading Day the Holder purchases (in
an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which the
Holder anticipated receiving upon such conversion (a "BUY-IN"), then the
Company shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder anticipated receiving from the
conversion at issue multiplied by (2) the market price of the Common Stock at
the time of the sale giving rise to such purchase obligation and (B) at the
option of the Holder, either reissue Debentures in principal amount equal to
the principal amount of the attempted conversion or deliver to the Holder the
number of shares of Common Stock that would have been issued had the Company
timely complied with its delivery requirements under Section 4(b)(i). For
example, if the Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of
Debentures with respect to which the market price of the Underlying Shares on
the date of conversion was a total of $10,000 under clause (A) of the
immediately preceding sentence, the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In. Notwithstanding
anything contained herein to the contrary, if a Holder requires the Company to
make payment in respect of a Buy-In for the failure to timely deliver
certificates hereunder and the Company timely pays in full such payment, the
Company shall not be required to pay such Holder liquidated damages under
Section 4(b)(ii) in respect of the certificates resulting in such Buy-In.
(c) (i) The conversion price (the "CONVERSION PRICE") in
effect on any Conversion Date shall equal 110% of the average of the Per Share
Market Values for the 20 Trading Days immediately following the Original Issue
Date.
(ii) If the Company, at any time while any
Debentures are outstanding, (a) shall pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock, (b) subdivide
outstanding shares of Common Stock into a larger number of shares, (c) combine
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of shares of
the Common Stock any shares of capital stock of the Company, then the Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding after such event. Any adjustment made pursuant to this
Section shall become effective immediately after the record date for the
determination of stockholders entitled to
-11-
Convertible Debenture
receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any
Debentures are outstanding, shall issue rights, options or warrants to all
holders of Common Stock (and not to Holders) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the Per Share
Market Value at the record date mentioned below, then the Conversion Price shall
be multiplied by a fraction, of which the denominator shall be the number of
shares of the Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
numerator shall be the number of shares of the Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at such Per Share Market Value. Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. However,
upon the expiration of any such right, option or warrant to purchase shares of
the Common Stock the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section, if any such right, option or warrant
shall expire and shall not have been exercised, the Conversion Price shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Conversion Price made pursuant to the
provisions of this Section after the issuance of such rights or warrants) had
the adjustment of the Conversion Price made upon the issuance of such rights,
options or warrants been made on the basis of offering for subscription or
purchase only that number of shares of the Common Stock actually purchased upon
the exercise of such rights, options or warrants actually exercised.
(iv) If the Company or any subsidiary thereof, as
applicable with respect to Common Stock Equivalents (as defined below), at any
time while any principal amount is outstanding under the Debentures, shall issue
shares of Common Stock or rights, warrants, options or other securities or debt
that is convertible into or exchangeable for shares of Common Stock ("COMMON
STOCK EQUIVALENTS") entitling any Person to acquire shares of Common Stock, at a
price per share less than the Conversion Price (if the holder of the Common
Stock or Common Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
issued in connection with such issuance, be entitled to receive shares of Common
Stock at a price less than the Conversion Price, such issuance shall be deemed
to have occurred for less than the Conversion Price), then, at the option of the
Holder, the Conversion Price shall be replaced with the conversion, exchange or
purchase price for such Common Stock or Common Stock Equivalents (including any
reset provisions thereof) for all subsequent conversions of principal amount
under the Debentures or such conversions. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. The Company
shall notify the Holder in writing, no later than the Trading Day following the
issuance of any Common Stock or Common Stock Equivalent
-12-
Convertible Debenture
subject to this section, indicating therein the applicable issuance price, or
of applicable reset price, exchange price, conversion price and other pricing
terms. Notwithstanding the foregoing, the following shall not be deemed to
be Common Stock Equivalents: issuances pursuant to a grant or exercise of
stock, warrants or options which may hereafter be granted or exercised under
any employee or director benefit plan or compensation program of the Company
now existing or to be implemented in the future.
(v) If the Company, at any time while Debentures
are outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, then in each such case the Conversion
Price at which Debentures shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the Per Share Market Value
determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value on such record date less the then fair
market value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holders of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(vi) In case of any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the Common Stock is
converted into other securities, cash or property, the Holders shall have the
right thereafter to, at their option, (A) convert the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts then
owing hereunder in respect of this Debenture only into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or share exchange,
and the Holders of the Debentures shall be entitled upon such event to receive
such amount of securities, cash or property as the shares of the Common Stock of
the Company into which the then outstanding principal amount, together with all
accrued but unpaid interest and any other amounts then owing hereunder in
respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal amount of
Debentures, plus all interest and other amounts due and payable thereon, at a
price and on the terms in accordance with Section 3(b). The entire prepayment
price shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vii) All calculations under this Section 4 shall
be made to the nearest cent or the nearest 1/100th of a share, as the case may
be. No adjustments in the Conversion Price shall be required if such adjustment
is less than $0.01, PROVIDED, that any adjustments which
-13-
Convertible Debenture
by reason of this Section are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(viii) Whenever the Conversion Price is adjusted
pursuant to any of Section 4(c)(ii) - (v), the Company shall promptly mail to
each Holder a notice setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment.
(ix) If (A) the Company shall declare a dividend
(or any other distribution) on the Common Stock; (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock; (C)
the Company shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Debentures, and shall
cause to be mailed to the Holders at their last addresses as they shall appear
upon the stock books of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, PROVIDED, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Debentures during the 20-day
period commencing the date of such notice to the effective date of the event
triggering such notice.
(x) In case of any (1) merger or consolidation of
the Company with or into another Person, or (2) sale by the Company of more than
one-half of the assets of the Company (on an as valued basis) in one or a series
of related transactions, a Holder shall have the right to (A) if permitted under
Section 3(b) hereof, exercise its rights of prepayment under Section 3(b) with
respect to such event, (B) convert its aggregate principal amount of Debentures
then outstanding into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and such Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such
aggregate principal
-14- Convertible Debenture
amount of Debentures could have been converted immediately prior to such
merger, consolidation or sales would have been entitled, or (C) in the case
of a merger or consolidation, (x) require the surviving entity to issue
convertible debentures in an aggregate principal amount equal to the
aggregate principal amount of Debentures then held by such Holder, plus all
accrued and unpaid interest and other amounts owing thereon, which newly
issued convertible debentures shall have terms identical (including with
respect to conversion) to the terms of this Debenture and shall be entitled
to all of the rights and privileges of a Holder of Debentures set forth
herein and the agreements pursuant to which the Debentures were issued
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock other
securities issuable upon conversion thereof), and (y) simultaneously with the
issuance of such convertible debentures, shall have the right to convert such
instrument only into shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common Stock following
such merger or consolidation. In the case of clause (C), the conversion
price applicable for the newly issued convertible debentures shall be based
upon the amount of securities, cash and property that each share of Common
Stock would receive in such transaction and the Conversion Price in effect
immediately prior to the effectiveness or closing date for such transaction.
The terms of any such merger, sale or consolidation shall include such terms
so as to continue to give the Holders the right to receive the securities,
cash and property set forth in this Section upon any conversion or redemption
following such event. This provision shall similarly apply to successive such
events.
(d) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the Holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(e) The issuance of certificates for shares of the Common Stock
on conversion of the Debentures shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(f) Any and all notices or other communications or deliveries
to be provided by the Holders hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to the Company, at 00000 Xxxx
Xxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000-0000, facsimile No.: (000) 000-0000,
attention Chief Financial Officer, or such other address or facsimile number as
the Company may specify for such purposes
-15- Convertible Debenture
by notice to the Holders delivered in accordance with this Section. Any and
all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to each Holder at the
facsimile telephone number or address of such Holder appearing on the books
of the Company, or if no such facsimile telephone number or address appears,
at the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on
the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in
this Section prior to 6:30 p.m. (New York City time), (ii) the date after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section later
than 6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New York City time) on such date, (iii) four days after deposit in the
United States mail, (iv) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (v) upon actual
receipt by the party to whom such notice is required to be given.
SECTION 5. PUT OPTION. On the first year anniversary of the Original
Issue Date and thereafter, on each third monthly anniversary thereof, the
Holders shall have the right, at their sole discretion (the "PUT RIGHT"), to
require the Company to prepay all or a portion of the then outstanding principal
amount and interest under the Debentures by delivering to the Company a written
notice (a "PUT NOTICE"), specifying therein the outstanding principal amount and
interest subject to the Put Right. A date on which a Put Notice is delivered by
a Holder is a "PUT DATE" and the 75th day following a Put Date, is a "PUT
PAYMENT DATE." Subject to the right to deliver shares of Common Stock as
described in the immediately following sentence, not later than the Put Payment
Date, the Company will pay and deliver to the Holder exercising its Put Right,
free of any claim of subordination, an amount of cash (in immediately available
funds) equal to the sum of: (i) the principal amount of Debentures to be
prepaid, plus all accrued and unpaid interest thereon (each as indicated in the
Put Notice), and (ii) all other amounts, costs, expenses and liquidated damages
then owing in respect of such principal amount (the "PUT PRICE"). The Company
may deliver a written notice to the Holders no later than 30 Trading Days prior
to a Put Date (a "COMPANY NOTICE"), indicating therein its intention not to pay
in excess of a maximum dollar amount in cash as part of any subsequent Put Price
(the "MAXIMUM CASH AMOUNT") (the Company may indicate in such Company Notice
that the election contained therein shall continue for later periods until
revised), in which case, in response to a Put Notice, the Company shall: (i) pay
to the Holder the Maximum Cash Amount, if any, no later than the Put Payment
Date and (ii) deliver to the Holder not later than the third Trading Day
following the applicable Put Payment Date a number of shares of Common Stock
equal to the quotient obtained by dividing (A) the difference between the Put
Price and the Maximum Cash Amount by (B) the lower of (x) the Conversion Price
and (y) the average of the Per Share Market Values for the five Trading Days
preceding the Put Date. The Company's rights and obligations (as applicable) to
deliver shares of Common Stock pursuant to this Section 5 shall be subject to
the provisions of Sections 4(a)(iv)(B), 4(b)(ii) and 4(b)(iii) hereof,
respectively. If the Company shall fail to timely deliver a Company Notice to
the Holders, the Company will be required to pay the entire Put Price in cash.
If any portion of the cash portion of the Put Price shall
-16- Convertible Debenture
not be paid on or prior to the Put Payment Date, then, notwithstanding
anything herein to the contrary, the Holder shall have the right to either
(i) rescind the Put Notice or (ii) convert all or a portion of the principal
amount and interest under the Debentures previously subject to the Put Right
at a conversion price equal to the lower of (x) the Conversion Price and (y)
the average of the Per Share Market Values during the ten Trading Days
immediately preceding either the Put Payment Date or the date the Holder
rescinds the Put Notice, whichever is lower.
SECTION 6. DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday in the United States or a day on which
banking institutions in the State of New York are authorized or required by law
or other government action to close.
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's board of directors which is
not approved by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Company with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or more of the assets of the Company in one or a series of related
transactions, or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
"CLOSING PRICE" means on any particular date (a) the closing sales
price per share of Common Stock on such date on the Subsequent Market on which
the shares of Common Stock are then listed or quoted, or if there is no such
price on such date, then the closing sales price on the Subsequent Market on the
date nearest preceding such date, or (b) if the shares of Common Stock are not
then listed or quoted on a Subsequent Market, the closing sales price for a
share of Common Stock in the NASDAQ, as reported by the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the shares of Common Stock are not then reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices), then the average of the "Pink Sheet" quotes for
the relevant conversion period, as determined in good faith by the Holder, or
(d) if the shares of Common Stock are not then publicly traded the fair market
value of a share of Common Stock as determined by an Appraiser selected in good
faith by the Holders of a majority in interest of the principal amount of
Debentures then outstanding.
-17- Convertible Debenture
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, $.01 par value per share,
of the Company and stock of any other class into which such shares may hereafter
have been reclassified or changed.
"Effective Date" means the date on which an Underlying Shares
Registration Statement shall have first been declared effective by the
Securities and Exchange Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"INTEREST EFFECTIVENESS DATE" means the earlier to occur of (x)
the Effectiveness Date (as defined in the Registration Right Agreement) and (y)
the Effective Date.
"MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the
sum of (i) the greater of (A) 107% of the principal amount of Debentures to be
prepaid, plus all accrued and unpaid interest thereon, and (B) the principal
amount of Debentures to be prepaid, plus all accrued and unpaid interest
thereon, divided by the Conversion Price on (x) the date the Mandatory
Prepayment Amount is demanded or otherwise due or (y) the date the Mandatory
Prepayment Amount is paid in full, whichever is less, multiplied by the Closing
Price on (x) the date the Mandatory Prepayment Amount is demanded or otherwise
due or (y) the date the Mandatory Prepayment Amount is paid in full, whichever
is greater, and (ii) all other amounts, costs, expenses and liquidated damages
due in respect of such Debentures.
"ORIGINAL ISSUE DATE" shall mean the date of the first issuance of
the Debentures regardless of the number of transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such
Debenture.
"PER SHARE MARKET VALUE" means on any particular date (a) the
closing bid price per share of Common Stock on such date on the NASDAQ or on
such Subsequent Market on which the shares of Common Stock are then listed or
quoted, or if there is no such price on such date, then the closing bid price on
the NASDAQ or on such Subsequent Market on the date nearest preceding such date,
or (b) if the shares of Common Stock are not then listed or quoted on the NASDAQ
or a Subsequent Market, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (d) if the shares of
Common Stock are not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the Holders
of a majority in interest of the principal amount of Debentures then
outstanding.
-18- Convertible Debenture
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"PURCHASE AGREEMENT" means the Convertible Debenture Purchase
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Original Issue Date, to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means (a) a day on which the shares of Common Stock
are traded on the NASDAQ or on such Subsequent Market on which the shares of
Common Stock are then listed or quoted, or (b) if the shares of Common Stock are
not listed on the NASDAQ or a Subsequent Market, a day on which the shares of
Common Stock are traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the shares of Common Stock are not quoted on the OTC
Bulletin Board, a day on which the shares of Common Stock are quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices); PROVIDED, that in the event that the shares of Common Stock
are not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean a Business Day.
"TRANSACTION DOCUMENTS" shall have the meaning set forth in the
Purchase Agreement.
"UNDERLYING SHARES" means the shares of Common Stock issuable upon
conversion of Debentures or as payment of interest in accordance with the terms
hereof.
"UNDERLYING SHARES REGISTRATION STATEMENT" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement, covering among other things the resale of the Underlying Shares and
naming the Holder as a "selling stockholder" thereunder.
SECTION 7. Notwithstanding anything herein to the contrary, upon the
occurrence of an event pursuant to which a Holder shall be entitled to request
that the Company make a cash payment hereunder (including, but not limited to,
liquidated damages and mandatory prepayment of principal and interest
hereunder), then, upon such Holder providing Xxxxx Fargo Business Credit, Inc.
with notice of such event, at the sole option of such Holder, with respect to
each such cash payment: (i) as of the date due pursuant to the terms hereof,
such cash payment shall be added to the principal amount outstanding under the
Debentures held by it or (ii) the Company shall, no later than the third day
following the date such cash payment is due pursuant to the terms hereof,
deliver to such Holder a number of shares of Common Stock equal to the quotient
obtained by dividing (A) the amount of
-19- Convertible Debenture
such cash payment by (B) the average of the Per Share Market Values for the
five Trading Days preceding the date such cash payment is due pursuant to the
terms hereof or (iii) the Company shall pay such cash payment in full on the
60th day following the date such cash payment is due pursuant to the terms
hereof. The Company's obligations to deliver shares of Common Stock pursuant
to subsection (ii) of the immediately preceding sentence shall be subject to
the provisions of Section 4(b)(ii) and (iii) hereof. All overdue cash
payments pursuant to this Section shall entail a Late Fee (to accrue daily,
from the date such interest is due hereunder through and including the date
of payment), payable in cash.
SECTION 8. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Company. This Debenture ranks PARI PASSU with all other Debentures now or
hereafter issued under the terms set forth herein. As long as there are
Debentures outstanding, the Company shall not and shall cause it subsidiaries
not to, without the consent of a majority in interest of the Holders: (i) amend
its certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Holders; (ii) repay, repurchase or offer to
repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent permitted
or required under the Transaction Documents; or (iii) enter into any agreement
with respect to any of the foregoing.
SECTION 9. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
SECTION 10. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 11. Except as set forth in SCHEDULE 2.1(p) of the Purchase
Agreement, no indebtedness of the Company is senior to this Debenture in right
of payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom that is senior in any respect to the Company's
obligations under the Debentures.
-20- Convertible Debenture
SECTION 12. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof. The Company and the Holder hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
SECTION 13. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision
of this Debenture. The failure of the Company or the Holder to insist upon
strict adherence to any term of this Debenture on one or more occasions shall
not be considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this Debenture.
Any waiver must be in writing.
SECTION 14. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law
which would prohibit or forgive the Company from paying all or any portion of
the principal of or interest on the Debentures as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
SECTION 15. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.
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SIGNATURE PAGE FOLLOWS]
-21- Convertible Debenture
IN WITNESS WHEREOF, the Company has caused this Convertible
Debenture to be duly executed by a duly authorized officer as of the date first
above indicated.
LUMINANT WORLDWIDE CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxxxxx X. Xxxxxx
Title: CEO
Convertible Debenture
EXHIBIT A
NOTICE OF HOLDER CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the principal amount of Debenture set
forth below into shares of common stock, $.01 par value per share (the "Common
Stock"), of Luminant Worldwide Corporation (the "Company") according to the
conditions hereof, as of the date written below. If shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates and opinions as reasonably requested by the Company in accordance
therewith. No fee will be charged to the holder for any conversion, except for
such transfer taxes, if any.
Conversion calculations:
---------------------------------------------
Date to Effect Conversion
---------------------------------------------
Principal Amount of Debentures
to be Converted
---------------------------------------------
Number of shares of Common Stock to be Issued
Payment of Interest in Kind / / Yes / / No
If yes, $ _______ of Interest Accrued
on Account of Conversion at Issue
---------------------------------------------
Applicable Conversion Price
---------------------------------------------
Signature
---------------------------------------------
Name
---------------------------------------------
Address
Convertible Debenture
EXHIBIT B
NOTICE OF COMPANY CONVERSION
(To be Executed by the Company
in order to convert the Debenture)
The undersigned in the name and on behalf of Luminant Worldwide Corporation, a
Delaware company (the "COMPANY"), hereby notifies the addressee hereof of its
election to exercise its right to convert the principal amount of the Debenture
set forth below, into shares of Common Stock, par value $.01 per share (the
"COMMON STOCK"), of the Company, according to the conditions hereof, as of the
date written below. No fee will be charged to the Holder for any conversion,
except for such transfer taxes, if any, which may be incurred by the Company if
shares are to be issued in the name of a person other than in the name of the
addressee.
Conversion calculations:
---------------------------------------------
Date to Effect Conversion
---------------------------------------------
Principal Amount of Debentures
to be Converted
---------------------------------------------
Number of shares of Common Stock to be Issued
Payment of Interest in Kind / / Yes / / No
If yes, $ _______ of Interest Accrued
on Account of Conversion at Issue
---------------------------------------------
Applicable Conversion Price
---------------------------------------------
Signature
---------------------------------------------
Name
---------------------------------------------
Address
-2- Convertible Debenture
SCHEDULE 1
CONVERSION SCHEDULE
6% Convertible Debentures, due September 21, 2003, in the aggregate principal
amount of $17,000,000 issued by Luminant Worldwide Corporation This Conversion
Schedule reflects conversions made under Section 4(a)(i) of the above referenced
Debentures.
Dated:
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Aggregate
Principal
Amount
Remaining
Amount of Subsequent to
Date of Conversion Conversion Conversion Company Attest
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-3- Convertible Debenture
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-3- Convertible Debenture
